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The Art of Startup II

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Arman Suleimenov

on 6 July 2015

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Transcript of The Art of Startup II

How to get startup ideas
How to test an idea in the market
Minimum Viable Product
3 things to focus on!
Velocity to $1
How do you get users? How do you make money?
How to develop good ideas which seem like bad ideas?
Know the tools better than everyone else - Dropbox!
Know the problem better than everyone else - Kickstarter
Draw from your own experience
Startups unbundle the functions done by the incumbents
New York Times: brand, curation, distribution, classified ads
University: social experience, credentials, coursework, tests, job recruiting
Startups quite often originate as hobbies
Startups create new social norms
A Day in the Life of the CEO

* Monday: management, directional/opp-com meetings
* Tuesday: product
* Wed: marketing & communication & growth
* Th: developers & partnerships
* Fri: company, culture, hiring
* Sat: day-off, hiking
* Sun: reflections, strategy, getting ready

Structure of the course
Tuesday is when you report your progress
Focus on the single metric.
On Tuesday in one minute (sharp) every team will report 4 things
2. Your single metric as the measure of your progress
1. Remind everyone what your startup does
3. Things you tried which worked
4. Things you didn't try which didn't work ;)
4. Things you tried which didn't work
Start 'something'!
The goal is to kill a wantrepreneur inside you and actually build something useful.
“Fall in love with some activity, and do it! Nobody ever figures out what life is all about, and it doesn't matter. Explore the world. Nearly everything is really interesting if you go into it deeply enough. Work as hard and as much as you want to on the things you like to do the best. Don't think about what you want to be, but what you want to do. Keep up some kind of a minimum with other things so that society doesn't stop you from doing anything at all”. -Richard Feynman
Google, Airbnb, eBay
The secret. Something you believe in, but no one else believes.
Powerful people dismiss those ideas as toys - telephone/Skype
Video Message
Idea -> mockup -> prototype -> program -> product -> business -> profits
Idea: napkin drawing of a billion dollar concept
What's new?
Mockup: wireframe with all user screens
Prototype: ugly hack that works for single major use case
Program: clean code that works for all cases, with tests
Product: design, copywriting, pricing, physical components
Business: incorporation, regulatory filings, payroll, etc.
Profits: sell product for more than it costs you to make it
Conventional wisdom: idea is everything!
Startup community: ideas don't matter, execution is everything.
3rd view: it's neither product/idea or team/execution, but rather a market
Marc Andreessen: I'll assert that market is the most important factor in a startup's success or failure.
Good founder doesn't just have an idea, s/he has a bird's eye view of the idea maze.
Bad founder is just running to the entrance of 'photosharing' maze without any sense of history, players in the maze, casualties and the technologies
Peter Thiel's one thing: everyone in the company should at all times know what their one thing is, and others should know that as well.
Marc Andreessen's anti-todo
Any problems?
This is broken
Startups vs small businesses
A startup is about growth: it is a play for world domination, an attempt to build a business with global reach and billions in revenue
Startups usually involve new technology & unproven market.
A small business doesn't have ambitions of world domination. It is geared towards a limited geographical area or limited market.
Startups & internet, small businesses & physical storefronts
Small businesses must generate profits right away, while startups often go deep for the red before then sharply turning into the black or going bankrupt.
Startups must exhibit economies of scale
Startups must pursue large markets
To get a billion dollars in annual revenue, you need either a high price point or a large number of customers
Do market sizing calculations early and often
Top-down market sizing
Bottom-up market sizing
Tools for market research
News coverage, research papers, SEC filings
Validate the market with tools like Google Keyword Planner and Facebook Advertiser Tools
If the market is there, develop a landing page using Launchrock.co, photos from istockphoto.com, icons from iconfinder.com
Test out the market with Google Adwords and Facebook Ads
So you establish that a market exists before building a MVP.
You can take this idea too far. But most people new to startups aren't in danger of talking to too many customers.
Once you feel that the market is there, design a mockup of your product's website aka wireframe.
I used Balsamiq Mockups
Rules of copywriting
Homepage message: don't expect visitors to figure out what your product is about on the page # 10
Amazon writes the press release before they build the product. Do the same!
Someone is wrong on the Internet.
Simple & factual beats vague. 'X% of searchers who used both Blekko and Google preferred Blekko. Find out why.' is better than 'PageRank provides better search quality'
Call to action: do it many times (buy / sign up)
Let's talk about design.
Let's reiterate.
What does your product do?
How do we explain it?
How to make it beautiful and functional?
Vector and raster graphics
Contrast, Repetition, Alignment, Proximity
Fonts and Icons: fontawesome.io
Stock photos & animations
Don't reinvent the wheel: wireframes -> HTML/CSS
Twitter Bootstrap: http://getbootstrap.com/
Social, local, mobile
Do these recreational candy apps built by twenty-somethings solve problems of real significance?
Mobile. It all started in June 2007.
1.5B smartphones have been bought in the last 6 years. That's 665,000 smartphones a day.
At least 3.5B more will be installed to catch up to world feature phone penetration.
Plus, phones are replaced every few years.
App Store & Google Play with its unprecedented distribution is like World Wide Web.
Tens of billions of $ in profits every quarter in this space. Mobile is not overhyped.
Mobile offers rapidly growing market for software entrepreneurs + monetizable distribution for apps.
What about social?
It's older and less profitable than mobile due to lack of physical hardware sales comparable to Apple/Samsung.
But it's influential enough to spark civil wars and occupy significant portion of the industrialized world's conscious attention.
Major players: Facebook, Twitter, LinkedIn, Google+. Newer entrants: Pinterest, Instagram, Path, Quora, Tumblr. Old guys: Flickr, Reddit.
It took the mankind 40,000 years to reach a billion people, it took Facebook only 8 years to do the same ;)
1B MAUs on Facebook in 8.5 years: 322,320 users / day
Installation rate of smartphones >> growth of social networking. That's why FB is so interested in mobile.
Social connection is more permanent than an email address.
Social connections are digital roads between people. Today we send photos, videos & chat messages. Tomorrow that can be source code, 3D printer specs, money.
How did Facebook reach that scale? Virality!
Hipstamatic vs Instagram
Virality means the ability to acquire more customers w/o a constantly expanding physical salesforce.
p = 0.1, N = 50, tau = 1 day. What's the impact of increasing p by 2-fold, increasing N by 2-fold, decreasing tau by 2-fold?
N*p must be > 1 to achieve viral growth.
Increasing N is easier than increasing p.
Decreasing tau at first is easy.
Users need an incentive to share. Communications apps (email, FB, PayPal, Skype) are inherently viral. Dropbox & Google Drive are optionally viral. Mint.com?
Lowest common denominator increases N.
Financial incentives increase p.
Invited users should see exactly the same content.
Hotmail and email signature - 'Get your free email at Hotmail'
Youtube and Flash Video
Facebook's use of Gmail contacts
Zynga's incentive structure
Let's talk Local. 2 meanings!
The use of GPS signal - location-based app
Bringing technology to local businesses
Google Maps
Small local businesses are the last to adopt new technology.
The upside of new glowing tech (shown by some 20-something) is unclear and might put the restaurant into a halt.
Restaurant's golden rule: rent < 25 % of revenue, payroll < 25%, 35 % < product, 15 % is what you take home.
Why local businesses are a tough sell?
In-person sales. Local business owners don't spend time online looking for new tech.
Low margins. Most local businesses aren't making much money.
High customer-service overload. Local biz have no engineers to do integration or upgrades, everyone is busy serving customers or mopping floors.
Uncertain gains. The transition costs for new tech often overwhelm the benefits.
Making the sale to Starbucks (or even a smaller chain) provides higher ROI than making a sale to small business.
Why do people love mobile, social and local?
Social app can have incredible viral growth.
Mobile app is riding the worldwide smartphone/tablet phenomenon.
Local app can use GPS in interesting ways and/or reach untouched small business markets.
If you don't have a social and/or mobile component, it's like not having a website.
Your growth may be limited relative to a competitor that does, even if their product is measurably inferior in other respects.
The biggest challenges founders face
Building a great product
Getting users
Finding the product-market fit
May be fundraising?
Employee retention
Common failure mode for startups is to do a great job recruiting the 10 employees and then have many of them leave after 18 months
You're going to lose some people, but if you lose too many, you'll fail.
How do you keep talent?
A sense of mission!
A "mission" doesn't have to be saving the world. It can also be solving a very hard technical problem, i.e. interesting work.
If you can't convince yourself that your mission is important, think very hard about what you're doing.
Give people the power to share and make the world more open and connected.
Organize the world’s information and make it universally accessible and useful.
To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.
The 2nd retention strategy is rocketship growth which brings new challenges and holds the promise of life-changing money through equity.
The third is a great work environment. What constitutes it?
Cultural values and team (A players want to work with other A players).
A common mistake that founders make to try retain employees is to compete in the perks arms race.
Another common mistake founders make is not realizing how awful they are to work for.
Compensation is really important too. The right thing to do is to be very generous with equity for early employees.
What's hot?
Markets for spare capacity: Uber, Airbnb, Hotel Tonight, Boatbound
Enterprise software: Box, Yammer, Palantir
Payments: Bitcoin, Dwolla, Square
MOOCs / Ed-tech: Udacity, Khan Academy, Codecademy, Coursera, Udemy, Skillshare.
Natural User Interfaces: LeapMotion, Haptix, Myo
Internet of Things: Nest Labs, CubeSensors, Electric Imp, Automatic, SmartThings, Lockitron.
Wearable Technology: Google Glass, Pebble Smartwatch, Memoto, Misfit Wearables, BASIS, Lumoback, Jawbone UP
Crowdfunding: Watsi, Microryza, Crowdtilt, Funder's Club, LendingClub
Real-time machine translation reduces the importance of the native language
Plug computer, Raspberry pi reduces the importance of size and location
Augmented reality - layer software over the physical world anywhere
3D printing reduces patent/political restrictions on physical goods
MOOCs - hyperdeflation of educational costs
Killing Hollywood - decentralize entertainment
Seasteading - facilitate emigration, reduce political constraints
Crowdfunding - reduce importance of Silicon Valley VCs and banks
Pharma cliff, generics - complete disruption of US pharmaceutical industry
Bitcoin - reduce reliance on single reserve currency, banks
Sequencing - see your own genome without an MD prescription
Telepresence robots, drones - reduce importance of physical location
360-degree treadmill - permits actual holodeck; reduces importance of location
P2P/Bittorrent - reduce reliance on centralized backbone
Blogs - reduce importance of national opinion journalism
Microblogs - reduce importance of network news outlets
Social networks - friends are now independent of physical location
Laptops, smartphones, tablets - computation is now independent of location
Video chat - reduce importance of physical location
Search engines, ebooks - access all information, anytime, for free
E-commerce - reduce importance of physical store location
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